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A home selling process can be stressful, especially if you’re on a strict timeline. When our clients say that “I want to sell my home fast in Queens”, they found the cash offer option a quick and easy solution. However, what most people hardly know is the tax implications associated with such a sale, which may affect the financial outcome. The following article will cover key tax considerations of selling your Queens property for cash. Knowing in advance the tax implications, you can have a better opportunity to make informed decisions and potentially maximize your after-tax proceeds.
Understanding Capital Gains Tax
The capital gains tax is one of the most vital tax consequences that need to be understood when one is seeking to sell your home fast for cash. This tax is imposed on the amount that you earn from the sale of your property for which the calculation is done on the differences between the selling price and adjusted basis.Exemptions for Primary Residences
There is an exclusion of capital gains tax if the home has been your principal residence for two of the last five years. For single taxpayers, the first 250 thousand dollars of capital gains can be excluded, while for married taxpayers filing jointly, the exclusion is 500 thousand dollars. This exclusion can greatly lower the amount of your taxable income from the sale and therefore it is quite important to check if you meet the requirements before the sale is complete.Short-Term vs. Long-Term Capital Gains
The length of time you have owned the property also affects the capital gains tax rate. If you have owned the house for one year or less, any gain that you receive from the sale will be classified under short-term capital gains and will be taxed at your normal income tax rate and this can be as high as 37% depending on your income. On the other hand, long term capital gains that come from property disposal where the property was held for more than one year, are charged at a relatively lower rate of 0% to 20% based on the income level of the investor.State and Local Taxes
Other than federal capital gains taxes, there are state and local taxes for the sellers of New York, also to be taken into consideration to ensure fast home selling.- State Transfer Tax: A state transfer tax of $2 for every $500 of selling price applies, working out to 0.4% of the sale price.
- New York City: The surcharge for the transfer tax in NYC was 1% on all properties sold for $500,000 or more, growing to 1.425% for those sold for $1 million or more.
Additional Considerations
When selling your home fast for cash, it’s important to consider various selling costs and tax reporting requirements that could impact your final profit.Selling Costs and Deductions
When calculating your capital gains, remember that selling costs can be deducted from your profit. These costs may include:- Real estate agent commissions (usually around 5-6% of the sale price)
- Closing costs (title insurance, attorney fees, etc.)
- Home improvements made to the property
